Company Quick10K Filing
Zillow
Price29.53 EPS-1
Shares207 P/E-30
MCap6,113 P/FCF-9
Net Debt-920 EBIT-208
TEV5,193 TEV/EBIT-25
TTM 2019-09-30, in MM, except price, ratios
10-K 2020-12-31 Filed 2021-02-12
10-Q 2020-09-30 Filed 2020-11-05
10-Q 2020-06-30 Filed 2020-08-06
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-02-19
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-07
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-02-21
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-06
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-02-15
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-05-04
10-K 2016-12-31 Filed 2017-02-07
10-Q 2016-09-30 Filed 2016-11-02
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-04
10-K 2015-12-31 Filed 2016-02-12
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-05
10-Q 2015-03-31 Filed 2015-05-12
8-K 2020-11-05
8-K 2020-10-11
8-K 2020-09-17
8-K 2020-08-06
8-K 2020-06-09
8-K 2020-06-02
8-K 2020-05-15
8-K 2020-05-12
8-K 2020-05-07
8-K 2020-04-06
8-K 2020-03-23
8-K 2020-03-23
8-K 2020-03-17
8-K 2020-02-19
8-K 2019-11-18
8-K 2019-11-07
8-K 2019-10-04
8-K 2019-09-04
8-K 2019-09-04
8-K 2019-09-03
8-K 2019-08-07
8-K 2019-06-04
8-K 2019-05-09
8-K 2019-05-03
8-K 2019-04-23
8-K 2019-02-21
8-K 2018-11-13
8-K 2018-11-06
8-K 2018-10-31
8-K 2018-10-16
8-K 2018-08-03
8-K 2018-08-02
8-K 2018-06-28
8-K 2018-06-28
8-K 2018-06-25
8-K 2018-05-31
8-K 2018-05-03
8-K 2018-04-12
8-K 2018-02-08

Z 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Note 1. Organization and Description of Business
Note 2. Summary of Significant Accounting Policies
Note 3. Fair Value Measurements
Note 4. Cash and Cash Equivalents, Short - Term Investments and Restricted Cash
Note 5. Accounts Receivable, Net
Note 6. Inventory
Note 7. Contract Cost Assets
Note 8. Property and Equipment, Net
Note 9. Equity Investment
Note 10. Intangible Assets, Net
Note 11. Deferred Revenue
Note 12. Leases
Note 13. Debt
Note 14. Income Taxes
Note 15. Share - Based Awards
Note 16. Net Loss per Share
Note 17. Commitments and Contingencies
Note 18. Related Party Transactions
Note 19. Self - Insurance
Note 20. Employee Benefit Plan
Note 21. Segment Information and Revenue
Note 22. Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 q22019form10-qex311.htm
EX-31.2 q22019form10-qex312.htm
EX-32.1 q22019form10-qex321.htm
EX-32.2 q22019form10-qex322.htm

Zillow Earnings 2019-06-30

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02013201520172020
Assets, Equity
0.80.60.40.20.0-0.22013201520172020
Rev, G Profit, Net Income
1.30.90.50.2-0.2-0.62013201520172020
Ops, Inv, Fin

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________
FORM 10-Q
_____________________________________________________
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-36853
 
_____________________________________________________
ZILLOW GROUP, INC.
(Exact name of registrant as specified in its charter)
_____________________________________________________
Washington
 
47-1645716
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
1301 Second Avenue, Floor 31,
Seattle, Washington 98101
(Address of principal executive offices) (Zip Code)
(206) 470-7000
@ZillowGroup
(Registrant’s telephone number, including area code)
 _____________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share
ZG
The Nasdaq Global Select Market
Class C Capital Stock, par value $0.0001 per share
Z
The Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 

 
Accelerated filer
 
 
 
 
 
 
 
 
Non-accelerated filer
 
  
 
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of July 31, 2019, 58,486,480 shares of Class A common stock, 6,217,447 shares of Class B common stock, and 141,903,904 shares of Class C capital stock were outstanding.
 


Table of Contents

ZILLOW GROUP, INC.
Quarterly Report on Form 10-Q
For the Three Months Ended June 30, 2019
TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 6.
 
 
 
 
 

i

Table of Contents

As used in this Quarterly Report on Form 10-Q, the terms “Zillow Group,” “the Company,” “we,” “us” and “our” refer to Zillow Group, Inc., unless the context indicates otherwise.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including Part I, Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), contains forward-looking statements based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include all statements that are not historical facts and generally may be identified by terms such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” or the negative or plural of these words or similar expressions.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those risks, uncertainties and assumptions described in Part I, Item 1A (Risk Factors) in our Annual Report on Form 10-K for the year ended December 31, 2018. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements, and we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.
WHERE YOU CAN FIND MORE INFORMATION
Our filings with the Securities and Exchange Commission, or SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available on our website at www.zillowgroup.com, free of charge, as soon as reasonably practicable after the electronic filing of these reports with the SEC. The information contained on our website is not a part of this quarterly report on Form 10-Q or any other document we file with the SEC.
Investors and others should note that Zillow Group announces material financial information to its investors using its press releases, SEC filings and public conference calls and webcasts. Zillow Group intends to also use the following channels as a means of disclosing information about Zillow Group, its services and other matters and for complying with its disclosure obligations under Regulation FD:
 
Zillow Group Investor Relations Webpage (http://investors.zillowgroup.com)
Zillow Group Investor Relations Blog (http://www.zillowgroup.com/ir-blog)
Zillow Group Twitter Account (https://twitter.com/zillowgroup)
The information Zillow Group posts through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following Zillow Group’s press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this quarterly report on Form 10-Q or any other document we file with the SEC, and the inclusion of our website addresses and Twitter account are as inactive textual references only.

1

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
ZILLOW GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data, unaudited)
 
June 30,
2019
 
December 31,
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
766,698

 
$
651,058

Short-term investments
673,029

 
903,867

Accounts receivable, net of allowance for doubtful accounts of $4,809 and $4,838 at June 30, 2019 and December 31, 2018, respectively
82,261

 
66,083

Mortgage loans held for sale
38,653

 
35,409

Inventory
552,823

 
162,829

Prepaid expenses and other current assets
62,062

 
61,067

Restricted cash
43,882

 
12,385

Total current assets
2,219,408

 
1,892,698

Contract cost assets
46,271

 
45,819

Property and equipment, net
145,932

 
135,172

Right of use assets
210,080

 

Goodwill
1,984,907

 
1,984,907

Intangible assets, net
202,824

 
215,904

Other assets
16,498

 
16,616

Total assets
$
4,825,920

 
$
4,291,116

Liabilities and shareholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
8,028

 
$
7,471

Accrued expenses and other current liabilities
68,520

 
63,101

Accrued compensation and benefits
32,001

 
31,388

Revolving credit facilities
409,799


116,700

Warehouse lines of credit
30,057

 
33,018

Deferred revenue
37,080

 
34,080

Deferred rent, current portion

 
1,740

Lease liabilities, current portion
18,794

 

Total current liabilities
604,279

 
287,498

Deferred rent, net of current portion

 
19,945

Lease liabilities, net of current portion
211,593

 

Long-term debt
716,819

 
699,020

Deferred tax liabilities and other long-term liabilities
15,123

 
17,474

Total liabilities
1,547,814

 
1,023,937

Commitments and contingencies (Note 17)

 

Shareholders’ equity:
 
 
 
Preferred stock, $0.0001 par value; 30,000,000 shares authorized; no shares issued and outstanding

 

Class A common stock, $0.0001 par value; 1,245,000,000 shares authorized; 58,474,815 and 58,051,448 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
6

 
6

Class B common stock, $0.0001 par value; 15,000,000 shares authorized; 6,217,447 shares issued and outstanding as of June 30, 2019 and December 31, 2018
1

 
1

Class C capital stock, $0.0001 par value; 600,000,000 shares authorized; 141,821,374 and 139,635,370 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
14

 
14

Additional paid-in capital
4,088,470

 
3,939,842

Accumulated other comprehensive income (loss)
896

 
(905
)
Accumulated deficit
(811,281
)
 
(671,779
)
Total shareholders’ equity
3,278,106

 
3,267,179

Total liabilities and shareholders’ equity
$
4,825,920

 
$
4,291,116

See accompanying notes to condensed consolidated financial statements.

2

Table of Contents

ZILLOW GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data, unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019

2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
IMT
$
323,669

 
$
305,941

 
$
621,941

 
$
586,797

Homes
248,924

 

 
377,396

 

Mortgages
26,985

 
19,305

 
54,345

 
38,328

Total revenue
599,578

 
325,246

 
1,053,682

 
625,125

Cost of revenue (exclusive of amortization) (1):
 
 
 
 
 
 
 
IMT
26,059

 
24,290

 
50,310

 
46,884

Homes
240,732

 

 
363,151

 
86

Mortgages
4,430

 
1,237

 
9,108

 
2,476

Total cost of revenue
271,221

 
25,527

 
422,569

 
49,446

Sales and marketing
187,433

 
147,727

 
349,020

 
285,018

Technology and development
120,330

 
100,376

 
228,100

 
194,309

General and administrative
82,839

 
60,579

 
178,613

 
116,652

Acquisition-related costs

 
632

 

 
659

Integration costs
293

 

 
645

 

Total costs and expenses
662,116

 
334,841

 
1,178,947

 
646,084

Loss from operations
(62,538
)
 
(9,595
)
 
(125,265
)
 
(20,959
)
Other income
9,458

 
3,089

 
18,626

 
5,535

Interest expense
(18,897
)
 
(7,187
)
 
(35,363
)
 
(14,260
)
Loss before income taxes
(71,977
)
 
(13,693
)
 
(142,002
)
 
(29,684
)
Income tax benefit

 
10,600

 
2,500

 
8,000

Net loss
$
(71,977
)
 
$
(3,093
)
 
$
(139,502
)
 
$
(21,684
)
Net loss per share — basic and diluted
$
(0.35
)
 
$
(0.02
)
 
$
(0.68
)
 
$
(0.11
)
Weighted-average shares outstanding — basic and diluted
205,754

 
194,155

 
205,137

 
192,807

 ____________________
(1) Amortization of website development costs and intangible assets included in technology and development
$
14,656

 
$
21,020

 
$
29,056

 
$
43,569

See accompanying notes to condensed consolidated financial statements.


3

Table of Contents

ZILLOW GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands, unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Net loss
$
(71,977
)
 
$
(3,093
)
 
$
(139,502
)
 
$
(21,684
)
Other comprehensive income (loss):
 
 
 
 

 

Unrealized gains (losses) on investments
751

 
223

 
1,895

 
(109
)
Currency translation adjustments
(52
)
 
(44
)
 
(94
)
 
(66
)
Total other comprehensive income (loss)
699

 
179

 
1,801

 
(175
)
Comprehensive loss
$
(71,278
)
 
$
(2,914
)
 
$
(137,701
)
 
$
(21,859
)
See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

ZILLOW GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share data, unaudited)
 
 
Class A Common
Stock, Class B
Common Stock and
Class C Capital Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income
 
Total
Shareholders’
Equity
 
 
Shares
 
Amount
 
 
Balance at April 1, 2019
205,130,332

 
$
21

 
$
4,022,218

 
$
(739,304
)
 
$
197

 
$
3,283,132

 
Issuance of common and capital stock upon exercise of stock options
814,062

 

 
19,433

 

 

 
19,433

 
Vesting of restricted stock units
569,260

 

 

 

 

 

 
Shares and value of restricted stock units withheld for tax liability
(18
)
 

 
(1
)
 

 

 
(1
)
 
Share-based compensation expense

 

 
46,820

 

 

 
46,820

 
Net loss

 

 

 
(71,977
)
 

 
(71,977
)
 
Other comprehensive income

 

 

 

 
699

 
699

 
Balance at June 30, 2019
206,513,636

 
$
21

 
$
4,088,470

 
$
(811,281
)
 
$
896

 
$
3,278,106

 
 
Class A Common
Stock, Class B
Common Stock and
Class C Capital Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
Shareholders’
Equity
 
 
Shares
 
Amount
 
 
Balance at April 1, 2018
192,944,326

 
$
20

 
$
3,340,387

 
$
(570,512
)
 
$
(1,454
)
 
$
2,768,441

 
Issuance of common and capital stock upon exercise of stock options
2,065,545

 

 
46,747

 

 

 
46,747

 
Vesting of restricted stock units
439,944

 

 

 

 

 

 
Shares and value of restricted stock units withheld for tax liability
(711
)
 

 
(37
)
 

 

 
(37
)
 
Share-based compensation expense

 

 
41,444

 

 

 
41,444

 
Net loss

 

 

 
(3,093
)
 

 
(3,093
)
 
Other comprehensive income

 

 

 

 
179

 
179

 
Balance at June 30, 2018
195,449,104

 
$
20

 
$
3,428,541

 
$
(573,605
)
 
$
(1,275
)
 
$
2,853,681















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Table of Contents

 
 
Class A Common
Stock, Class B
Common Stock and
Class C Capital Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Shareholders’
Equity
 
 
Shares
 
Amount
 
 
Balance at January 1, 2019
203,904,265

 
$
21

 
$
3,939,842

 
$
(671,779
)
 
$
(905
)
 
$
3,267,179

 
Issuance of common and capital stock upon exercise of stock options
1,543,850

 

 
32,997

 

 

 
32,997

 
Vesting of restricted stock units
1,065,607

 

 

 

 

 

 
Shares and value of restricted stock units withheld for tax liability
(86
)
 

 
(3
)
 

 

 
(3
)
 
Share-based compensation expense

 

 
115,634

 

 

 
115,634

 
Net loss

 

 

 
(139,502
)
 

 
(139,502
)
 
Other comprehensive income

 

 

 

 
1,801

 
1,801

 
Balance at June 30, 2019
206,513,636

 
$
21

 
$
4,088,470

 
$
(811,281
)
 
$
896

 
$
3,278,106


 
 
Class A Common
Stock, Class B
Common Stock and
Class C Capital Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
Shareholders’
Equity
 
 
Shares
 
Amount
 
 
Balance at January 1, 2018
190,115,148

 
$
20

 
$
3,254,146

 
$
(592,243
)
 
$
(1,100
)
 
$
2,660,823

 
Cumulative-effect adjustment from adoption of guidance on revenue from contracts with customers

 

 

 
40,322

 

 
40,322

 
Issuance of common and capital stock upon exercise of stock options
4,479,759

 

 
99,653

 

 

 
99,653

 
Vesting of restricted stock units
834,788

 

 

 

 

 

 
Shares and value of restricted stock units withheld for tax liability
(1,318
)
 

 
(65
)
 

 

 
(65
)
 
Share-based compensation expense

 

 
74,307

 

 

 
74,307

 
Portion of conversion recorded in additional paid-in-capital in connection with partial conversion of convertible notes maturing in 2020
20,727

 

 
500

 

 

 
500

 
Net loss

 

 

 
(21,684
)
 

 
(21,684
)
 
Other comprehensive loss

 

 

 

 
(175
)
 
(175
)
 
Balance at June 30, 2018
195,449,104

 
$
20

 
$
3,428,541

 
$
(573,605
)
 
$
(1,275
)
 
$
2,853,681

See accompanying notes to condensed consolidated financial statements.


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Table of Contents

ZILLOW GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
 
Six Months Ended
June 30,
 
2019
 
2018
Operating activities
 
 
 
Net loss
$
(139,502
)
 
$
(21,684
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
41,728

 
52,926

Share-based compensation expense
109,756

 
69,684

Amortization of right of use assets
10,572

 

Amortization of contract cost assets
17,880

 
18,309

Amortization of discount and issuance costs on convertible notes maturing in 2023 and 2021
17,799

 
9,504

Deferred income taxes
(2,500
)
 
(8,000
)
Loss on disposal of property and equipment
3,878

 
2,106

Bad debt expense
706

 
(352
)
Deferred rent

 
(2,845
)
Accretion of bond discount
(3,695
)
 
(504
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(16,884
)
 
(9,335
)
Mortgage loans held for sale
(3,244
)
 

Inventory
(389,994
)
 
(5,666
)
Prepaid expenses and other assets
(2,015
)
 
(14,697
)
Lease liabilities
(11,946
)
 

Contract cost assets
(18,332
)
 
(21,371
)
Accounts payable
1,256

 
1,855

Accrued expenses and other current liabilities
6,952

 
(5,189
)
Accrued compensation and benefits
613

 
4,309

Deferred revenue
3,000

 
4,002

Other long-term liabilities
149

 

Net cash provided by (used in) operating activities
(373,823
)
 
73,052

Investing activities
 
 
 
Proceeds from maturities of investments
539,312

 
172,573

Purchases of investments
(302,891
)
 
(230,276
)
Purchases of property and equipment
(29,672
)
 
(31,212
)
Purchases of intangible assets
(8,927
)
 
(4,777
)
Net cash provided by (used in) investing activities
197,822

 
(93,692
)
Financing activities
 
 
 
Proceeds from borrowing on revolving credit facilities
293,099



Net repayments on warehouse lines of credit
(2,961
)
 

Proceeds from exercise of stock options
32,997

 
99,656

Value of equity awards withheld for tax liability
3

 
(66
)
Net cash provided by financing activities
323,138

 
99,590

Net increase in cash, cash equivalents and restricted cash during period
147,137

 
78,950

Cash, cash equivalents and restricted cash at beginning of period
663,443

 
352,095

Cash, cash equivalents and restricted cash at end of period
$
810,580

 
$
431,045

Supplemental disclosures of cash flow information
 
 
 
Cash paid for interest
$
16,616

 
$
4,733

Noncash transactions:
 
 
 
Capitalized share-based compensation
$
5,878

 
$
4,623

Write-off of fully depreciated property and equipment
$
9,867

 
$
13,293

Write-off of fully amortized intangible assets
$
3,311

 
$
10,797

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

ZILLOW GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Organization and Description of Business
Zillow Group, Inc. houses one of the largest portfolios of real estate brands on mobile and the web. Zillow Group is committed to leveraging its proprietary data, technology and innovations to make home buying, selling, financing and renting a seamless, on-demand experience for consumers. As its flagship brand, Zillow now offers a fully integrated home shopping experience that includes access to for sale and rental listings, Zillow Offers, which provides a new, hassle-free way to buy and sell homes directly through Zillow, and Zillow Home Loans, Zillow’s affiliated lender that provides an easy way to receive mortgage pre-approvals and financing. Other consumer brands include Trulia, StreetEasy, HotPads, Naked Apartments, RealEstate.com and Out East. In addition, Zillow Group provides a comprehensive suite of marketing software and technology solutions to help real estate professionals maximize business opportunities and connect with millions of consumers. Zillow Group also operates a number of business brands for real estate, rental and mortgage professionals, including Mortech, dotloop, Bridge Interactive and New Home Feed. Zillow, Inc. was incorporated as a Washington corporation in December 2004, and we launched the initial version of our website, Zillow.com, in February 2006. Zillow Group, Inc. was incorporated as a Washington corporation in July 2014 in connection with our acquisition of Trulia, Inc. (“Trulia”). Upon the closing of the Trulia acquisition in February 2015, each of Zillow, Inc. and Trulia became wholly owned subsidiaries of Zillow Group.
Certain Significant Risks and Uncertainties
We operate in a dynamic industry and, accordingly, can be affected by a variety of factors. For example, we believe that changes in any of the following areas could have a significant negative effect on us in terms of our future financial position, results of operations or cash flows: rates of revenue growth; our ability to manage advertising inventory or pricing; engagement and usage of our products; our investment of resources to pursue strategies that may not prove effective; competition in our market; the stability of the residential real estate market and the impact of interest rate changes; changes in government regulation affecting our business; outcomes of legal proceedings; natural disasters and catastrophic events; scaling and adaptation of existing technology and network infrastructure; management of our growth; our ability to attract and retain qualified employees and key personnel; our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments; protection of customers’ information and other privacy concerns; protection of our brand and intellectual property; and intellectual property infringement and other claims, among other things.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements include Zillow Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and accompanying notes included in Zillow Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on February 21, 2019. The condensed consolidated balance sheet as of December 31, 2018, included herein, was derived from the audited financial statements of Zillow Group, Inc. as of that date.
The unaudited condensed consolidated interim financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of June 30, 2019, our results of operations, comprehensive loss and shareholders’ equity for the three and six month periods ended June 30, 2019 and 2018, and our cash flows for the six month periods ended June 30, 2019 and 2018. The results of the three and six month periods ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any interim period or for any other future year.

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Table of Contents

Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. On an ongoing basis, we evaluate our estimates, including those related to the net realizable value of inventory, amortization period and recoverability of contract cost assets, website and software development costs, recoverability of long-lived assets and intangible assets with definite lives, share-based compensation, income taxes, business combinations, and the recoverability of goodwill and indefinite-lived intangible assets, among others. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected.
Recently Issued Accounting Standards Not Yet Adopted
In August 2018, the Financial Accounting Standards Board (“FASB”) issued guidance related to a customer’s accounting for implementation costs incurred in hosting arrangements. The guidance aligns the requirements for capitalizing implementation costs incurred in cloud computing arrangements with the requirements for capitalizing costs to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. This guidance may be applied either retrospectively or prospectively. We expect to adopt this guidance on January 1, 2020. We have not yet determined the impact the adoption of this guidance will have on our financial position, results of operations or cash flows.
In August 2018, the FASB issued guidance related to disclosure requirements for fair value measurements. This guidance removes, modifies and adds disclosures related to fair value measurements. This guidance is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim and annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. We expect to adopt this guidance on January 1, 2020. We have not yet determined the impact the adoption of this guidance will have on our financial statement disclosures.
In June 2016, and subsequently amended in April 2019 and May 2019, the FASB issued guidance on the measurement of credit losses on financial instruments. This guidance will require an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables. This guidance requires an entity to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument on initial recognition and at each reporting period. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. The adoption of this guidance requires a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We expect to adopt this guidance on January 1, 2020. We have not yet determined the impact the adoption of this guidance will have on our financial position, results of operations or cash flows.
Note 3. Fair Value Measurements
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
 
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.
We applied the following methods and assumptions in estimating our fair value measurements:
Cash equivalents — The fair value measurement of money market funds is based on quoted market prices in active markets. The fair value measurement of commercial paper is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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Table of Contents

Short-term investments — The fair value measurement of our short-term investments is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Restricted cash — Restricted cash consists of cash received from the resale of homes through Zillow Offers which may be used to repay amounts borrowed on our revolving credit facilities (see Note 13) and amounts held in escrow related to funding home purchases in our mortgage origination business. The carrying value of restricted cash approximates fair value due to the short period of time amounts borrowed on the revolving credit facilities are outstanding.
Mortgage loans held for sale — The fair value of mortgage loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics.
Interest rate lock commitments — The fair value of interest rate lock commitments (“IRLCs”) is calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics. Expired commitments are excluded from the fair value measurement. We generally only issue IRLCs for products that meet specific purchaser guidelines. Since not all IRLCs will become closed loans, we adjust our fair value measurements for the estimated amount of IRLCs that will not close.
Forward contracts — The fair value of mandatory loan sales commitments and derivative instruments such as forward sales of mortgage-backed securities that are utilized as hedging instruments are calculated by reference to quoted prices for similar assets.
The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy, as of the dates presented (in thousands):
 
June 30, 2019
 
Total
 
Level 1
 
Level 2
Cash equivalents:
 
 
 
 
 
Money market funds
$
641,436

 
$
641,436

 
$

Short-term investments:
 
 
 
 
 
U.S. government agency securities
446,736

 

 
446,736

Corporate notes and bonds
94,922

 

 
94,922

Commercial paper
87,062

 

 
87,062

Municipal securities
33,352

 

 
33,352

Foreign government securities
5,997

 

 
5,997

Certificates of deposit
1,481

 

 
1,481

Treasury bills
3,479

 

 
3,479

Mortgage origination-related:
 
 
 
 
 
Mortgage loans held for sale
38,653

 

 
38,653

IRLCs
1,186

 

 
1,186

Forward contracts - other current assets
32

 

 
32

Forward contracts - other current liabilities
(225
)
 

 
(225
)
        Total
$
1,354,111

 
$
641,436

 
$
712,675


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Table of Contents

 
December 31, 2018
 
Total
 
Level 1
 
Level 2
Cash equivalents:
 
 
 
 
 
Money market funds
$
541,575

 
$
541,575

 
$

Commercial paper
3,999

 

 
3,999

Short-term investments:
 
 
 
 
 
U.S. government agency securities
646,496